* China’s new EV sales expected to grow 40 pct in 2018 (Adds more details on which banks hired)

By Fiona Lau and Julie Zhu

HONG KONG, Feb 28 (Reuters) - Chinese electric vehicle startup NIO has hired eight banks for a planned U.S. stock market listing this year worth up to $2 billion, people with knowledge of the matter told Reuters.

At the top end of the potential offering size, the IPO would become the biggest Chinese listing in the United States since the $25 billion public float of e-commerce giant Alibaba Group Holding Ltd in 2014.

Shanghai-based NIO has tapped banks including Morgan Stanley and Goldman Sachs to work on the proposed initial public offering of $1 billion-$2 billion, the people said, declining to be identified as the details are not public.

China began promoting electric cars in 2009 and aims to become a dominant global producer as it bids to curb vehicle emissions, boost energy security and promote high-tech industries.

NIO counts Asian tech behemoth Tencent Holdings Ltd as its main backer, alongside investment firms Hillhouse Capital Group and Sequoia Capital. It seeks fresh capital from the proposed IPO to finance its expansion and investments in areas including autonomous driving and battery technologies, one of the people said.

The other banks hired are Bank of America Merrill Lynch , Credit Suisse, Citigroup, Deutsche Bank , JPMorgan and UBS, the people said.

Founded by Chinese internet entrepreneur William Li in 2014 and formerly known as NextEV, NIO is among the first of a raft of Chinese electric vehicle firms to launch a production vehicle, with many so far only showing concept cars.

It launched sales of its first mass production car - the ES8 pure-electric, seven-seat sport-utility vehicle in December, at about half the price of U.S. peer Tesla’s Model X. It has also vowed to bring an autonomous electric car to the U.S. market by 2020.

NIO, which plans to go public in the second half of the year, declined to comment on its IPO plans. BAML, Credit Suisse, Citigroup, Deutsche, Goldman, JPMorgan, UBS declined to comment while Morgan Stanley did not respond to Reuters emailed request for comment.

Although China’s auto market slowed sharply in 2017, new energy vehicles have been a bright spot. An industry body said last month new EV sales would likely grow 40 percent this year, topping 1 million vehicles. China’s finance ministry will also extend a tax rebate on purchases of NEVs until the end of 2020, a boost for hybrid and electric carmakers. Carmakers and investors in China have embarked on a flurry of dealmaking, pumping in billions of dollars into the so-called new energy vehicle sector in the world’s biggest auto market.

Chinese carmaker Geely, for instance, has built up an almost 10 percent stake in Daimler (DAIGn.DE) in a $9 billion bet, in a push to access the Mercedes-Benz owner’s know-how in electric and autonomous cars.

NIO raised more than $1 billion in November in its latest fundraising round, led by existing investor Tencent, valuing the firm at about $5 billion.

Its planned IPO could also top that of Chinese logistics company ZTO Express, which in October 2016 raised $1.41 billion from an IPO in New York.